i think the confusion arises from the difference between economic profits and accounting profits... if we're discussing opportunity costs, we're discussing economic profit, which i and many/most/everyone would argue is the truer measure
if given the choice of earning $1 for free, $2 for free, or doing nothing, you don't get to say, por que no los dos? each choice is made independently, and you should pick $2 each time
sure picking $1 has netted you an accounting profit of $1, but your economic profit (or loss rather) of picking $1 is -$1 when you could have had $2 instead. choosing to do nothing has no accounting loss, but economically, you've missed out on $2
the issue with this new BA offer is that you can only pick the '$2' once every 24 months, but for that first event on where to put 20k MS, the choices we consider are:
where to put 20k MS |
---|
100k offer |
50k offer + 18k @2% |
20k @2% |
don't |
... infinitely many other choices |
yes there are infinitely many other choices, but all we're concerned about is comparing a choice with the next best alternative
let's go over accounting profits to determine this next best alternative:
where to put 20k MS | accounting profit |
---|---|
100k offer | 120k avios - cost to MS 20k |
50k offer + 18k @2% | 52k avios + $360 - cost to MS 20k |
20k @2% | $400 - cost to MS 20k |
don't | $0 |
if we naively value avios at 1cpp and the cost to MS 20k at $0, we get:
where to put 20k MS | accounting profit |
---|---|
100k offer | $1200 |
50k offer + 18k @2% | $880 |
20k @2% | $400 |
don't | $0 |
now, let's take a look at economic profit/loss:
where to put 20k MS | accounting profit | economic profit |
---|---|---|
100k offer | $1200 | $1200 - $880 = $320 |
50k offer + 18k @2% | $880 | $880 - $1200 = -$320 |
20k @2% | $400 | $440 - $1200 = -$760 |
don't | $0 | $0 - $1200 = -$1200 |
your next round of 20k MS no longer has the 100k or 50k offer, so ofc, go ahead and MS another $20k, but that event is independent of the first $20k